Perspective

Do Businesses Really Need Standards?

Standards as Strategic Business Tools

By James Pauley

At the August annual conference of SES — The Society for Standards Professionals, James Pauley, senior vice president of external affairs and government relations at Schneider Electric, challenged the assembled to engage senior level executives in placing high value on standardization and talked about how to go about it.

Do businesses really need standards and conformity assessment?

Most CEOs would probably tell you that they don’t, but that’s because they don’t really understand what standards are or how they can impact the bottom line.

People who work in standardization have the power to solve this problem. We need to engage C-suite executives and change their perception. Without globally relevant standards and effective conformity assessment, businesses would lose market access and be faced with increased and disparate regulatory environments. We need to make sure that CEOs hear this message loud and clear.

After all, what CEOs don’t know will hurt them.

In my view, CEOs really need two things. The first is a basic understanding of standards and conformance: the “Standards 101,” if you will. The second is a strategic understanding of standardization as a business tool.

CEOs need to understand that standardization and conformity activities are powerful business tools at their disposal. These tools can help businesses out-innovate competitors in the global market and tap into new and expanding technologies, and help government and industry to fuel overall business performance and growth.

From design and manufacturing to distribution and marketing, all products and services are affected at some point by standardization. But standards and conformance also impact the strength of the American workforce, inform the direction of innovation and underpin global commerce.

Innovation is based on technology and product development, but it is also about reinventing business processes and building new markets that meet untapped customer needs. More than half of America’s economic growth comes from industries that barely existed 20 years ago. U.S. companies and industries that actively leverage standards and compliance programs foster innovation in the marketplace and, in turn, shorten the cycle between initial concept and global market access. We see this every day with the products we have come to depend on — our smartphones, our tablets, our GPS systems.

But there is another, more strategic aspect of this discussion, and that is the importance of industry participation in the actual development of globally relevant standards. Nearly every day, a standards group or technical committee is meeting somewhere; they are making decisions that affect the salability of products and services.

This is where the rubber meets the road, and it is the most critical part of our message to CEOs. By participating in standards development, companies can influence technical content and align their products and services with changing market demand. They can gain insiders’ knowledge and early access to information on emerging issues, and can reduce redundancy, minimize errors and shorten time to market. Businesses not only decrease the inherent economic risk of R&D activities by participating in standardization, they can also lower their costs by relying on previously standardized technologies.

It is an undisputed fact that standards and conformance are critical to the success of products, personnel and services in the marketplace. They play a critical role in the economy, impacting more than 80 percent of global commodity trade. The jury’s still out on what that will mean for 2013, but in 2012, that 80 percent came to more than $14 trillion.

With numbers like these, it’s easy to see why companies that participate actively in standardization gain a competitive edge.

It is clear that the effective utilization of globally relevant standards and conformance promotes technological interoperability and the competitiveness of all businesses. And greater cooperation and information-sharing will improve the bottom line — a top priority in today’s economic landscape. When individual businesses do well, there is a corresponding improvement in our national economies.

Put simply, standards boost business.

Standards Boost Business

That is why the American National Standards Institute and a group of more than 30 partnering organizations have joined forces for Standards Boost Business, a campaign to help American companies leverage standards and conformance to win a trade advantage in the global market. This is not solely an ANSI program: the institute is coordinating the effort, but it’s a partnership across the standardization community. And to gain its greatest advantage you have to get informed, and — better yet — you have to be involved.

SBB aims to inform and educate C-suite executives and senior public policy officials about the ways that standards and conformity assessment activities boost business performance and innovation, lower costs and help U.S. industry be more competitive in the global marketplace. SBB is also a call to action for corporate America to devote more resources — time, money and manpower — to standardization activities.

SBB case studies and testimonials provide real-world examples of how U.S. businesses are leveraging standards to their advantage.

The U.S. Department of Defense is projecting $789 million in cost avoidance on just one of their programs. How did they do it? They focused on parts standardization and process standardization.

The electrical fire safety industry collaborated on a critical standard for arc fault circuit interrupters, which is helping to reduce the more than 40,000 home electrical fires each year — fires that result in over 350 deaths and more than 1,400 injuries.

Deere & Co. manufactures agriculture and construction equipment that is exported and used around the world. By participating in standards development for component pieces like fittings and fasteners, Deere knows that these components will meet their needs “off the shelf.” And the more standardized components they can use, the less they, and their customers, have to pay.

By participating in standards development activities — and by implementing standards and conformance tools — each of these organizations has been able to streamline processes, trim costs, earn and maintain market access, and boost their bottom line.

We have also posted some great executive videos on the SBB site by several industry CEOs and trade association heads citing their own success stories. One of the latest features Russ Chaney, who is the CEO of the International Association of Plumbing and Mechanical Officials. Chaney says:

"If a company is unsure about participating in standards development, I would remind them that in the absence of their participation, their competitors will decide their destiny. I don’t think anybody — whether in the manufacturing sector, or in the code implementation sector, or in the training sector — would want someone else, particularly a competitor, determining their future."

For companies that develop, manufacture and distribute their products and services all over the world, reliance on globally relevant standards and conformance programs is imperative. Otherwise, you have products, personnel, systems and services that cannot cross borders. As the technical underpinning of many products and services, standards play a critical role in removing barriers to trade, enforcing free trade agreements and expanding foreign markets for U.S. goods and services. This results in increased export opportunities for U.S. companies abroad, which in turn helps create more jobs here at home.

American manufacturers, and particularly small to medium enterprises, should be aware of what they are missing out on in the export market when they do not take advantage of the economic and strategic value of standardization. Ninety-seven percent of companies that export are small- and mid-sized businesses, and yet the majority export to only one or two countries, leaving vast opportunities uncovered. With 95 percent of the world’s consumers outside the United States, none of us can afford to think within our own borders. We need to grow our exports to grow our economy. Standards and related compliance measures make cross-border interoperability possible, ensuring U.S.-manufactured components and products have market access in all the countries we want to sell in.

Reap the Rewards of Standards and Conformity

In today’s global marketplace, U.S. companies, industry and government need every advantage they can get. Based on some of the lessons we’ve learned at Schneider Electric, here are four important steps executives can take to make sure they reap the rewards that standards and conformance can provide.

Participate in standards development activities, both domestic and international. Active participation enables a company to exert influence on technical content and align its products and services with changing market demand. It provides insider knowledge and early access to information on emerging issues, and helps reduce redundancy, minimize errors and shorten time to market.

Rely on standards to design your products and services, and turn to recognized conformity assessment systems to test, inspect, certify and accredit them. Demonstrating compliance to standards helps a company’s products, services and personnel to cross borders. Standards also make cross-border interoperability possible, ensuring that products manufactured in one country can be sold and used in another.

Treat standardization as a strategic business tool. Standards and conformance are a marathon, not a sprint. As critical business tools, standards and conformance should be managed right alongside an organization’s quality, safety and environmental policies. They are just as important to the long-term health of a business.

Make a resource commitment — of time, money and manpower — to the U.S. standardization system. In difficult economic times, many companies feel the need to downsize or even eliminate their participation in standards development. But the resources needed to restart the process later on can be much more expensive and difficult than maintaining a well-functioning system for the long run.

Executives need to foster a company culture that values standardization. That means that they need to have clear internal processes related to standards and conformance, and they need to have employees dedicated to those specific tasks. Once those employees are in place, companies need to continuously support them and not slash travel budgets that would reduce company participation in standards development work, which can occur all over the world. Finally, and especially for smaller companies, they need to make sure that mentorships are in place so that the company isn’t adrift when a standards professional retires.

I started by asking you if businesses really need standards and conformity assessment. The question should really be: How can they survive without them?

Executives have two choices: Position their organization to take a seat at the table and be part of the standardization process, or let their competitors, both foreign and domestic — or the government — dictate the way they will be doing business.

Standards and conformance are essential to a sound national economy and global commerce. And at a time when the public and private sectors are looking to foster economic growth and create good jobs for the future, it is more important than ever that U.S. companies understand and harness the power of standardization.

Our nation has a strong, flexible and vibrant standards system that is devoted to continuously improving to meet the demands of industry, government and consumers. Ours is a solid foundation based on a long-standing public-private partnership, and it is ready today to help tackle the standardization needs of tomorrow. Together we can ensure America’s strength in the innovation age while driving business growth and advancing U.S. competitiveness on the global stage.

Working together, we can harness the power that standards and conformity assessment wield for U.S. businesses in the global market.

James Pauley is senior vice president of external affairs and government relations at Schneider Electric, Lexington, Ky., where he is responsible for that company’s state and federal legislative and regulatory policy. In addition to his responsibilities with Schneider, Pauley, currently is chairman of the board of the American National Standards Institute, has served in various capacities with industry groups and has held numerous leadership positions in organizations such as the Institute of Electrical and Electronic Engineers, the National Electrical Manufacturers Association and the National Fire Protection Association.